The TLDR: The Conservative Party’s fastest rising star is raising eyebrows and questions. The reason: He has not been entirely upfront about his wife, Akshata Murty’s fabulous wealth. Turns out being Narayana Murthy’s damaad is not ideal for his job description as Chancellor of the Exchequer.

Remind me about Sunak...

Here’s a quick catch-up on his life history:

• Born in 1980, he belongs to a Punjabi family that emigrated to West Africa, and then to Britain. His father was a family doctor who then started a pharmacy business.
• Sunak studied in a series of prep schools—where he was popular and described as a “high achiever.”
• He graduated from Oxford University with honours—and a passion for competitive ballroom dancing (we kid you not). 
• After a brief stint at Goldman Sachs, he opted for an MBA at Stanford—which is where he met Narayana Murthy’s daughter Akshata. They married in 2009 and now have two daughters.
• He returned to the UK to enter politics, and became an MP from Yorkshire in 2015. 
• And his rise since has been no less than meteoric: Minister for Local Government in January 2018, Chief Secretary to the Treasury by July 2019—and now Chancellor of the Exchequer, which is the equivalent of the Finance minister.

Point to note: Thus far, Sunak’s managed to remain widely well-liked: “It’s very difficult to dislike him. He’s a very easy-going, humble kind of guy.” OTOH, one of his nicknames is ‘Maharaja of the Dales’—a jibe at his fabulous family home in Yorkshire. And that is the one that may come back to bite him. 

Ok, why is he in trouble?

Because of his wife’s money. Over the past few days, The Guardian splashed two major investigations into his finances—and found that he has been far less than upfront about his family wealth. None of it is illegal, but they indicate a troubling lack of transparency—and in one case, a willingness to do a run around Indian laws. 

The not-so-full disclosure

The requirement: The ministerial code requires Sunak to disclose all financial information that is “relevant” to his role as Chancellor:

“Ministers are held to a higher level of disclosure than MPs. The code of conduct states they must provide a ‘full list in writing of all interests which might be thought to give rise to a conflict’. This list ‘should also cover interests of the minister’s spouse or partner and close family which might be thought to give rise to a conflict’.”

But in his filing, Sunak only mentions his wife’s UK-based venture capital firm, Catamaran Ventures. But that is a very tiny portion of her colossal wealth. Akshata’s moolah also includes:

One: A 0.91% stake in her papa’s company Infosys—which is worth £430 million (Rs 42.4 billion, making her richer than the Queen who is worth a paltry £350 million (Rs 34.5 billion). That stake also earns her millions in dividends each year. 

The potential problem: Infosys has scored contracts worth £22 million with the UK government since 2015. Plus this: “Infosys has also worked for the Home Office and has signed a framework agreement with Whitehall, which means it can be awarded contracts without competition.”

Two: While Sunak only acknowledges his wife’s ownership of the UK arm of Catamaran, she is also a director in the Indian company—which owns Cloudtail in partnership with Amazon. Cloudtail is also one of the biggest sellers on the platform.

The potential problem: “The investment could be seen as a conflict of interest, given that the chancellor is responsible for decisions about how to tax large digital corporations, such as Amazon, in the UK.”

Other undisclosed financials: include Akshata’s direct stakes in six other UK businesses—which include a nanny agency, gym operator, and a UK company that operates Jamie’s Pizzeria, Jamie’s Italian and Wendy’s outlets in India. 

A violation: When asked about the lack of disclosure, Boris Johnson’s advisers “confirmed he is completely satisfied with the chancellor’s propriety of arrangements and that he has followed the ministerial code to the letter in his declaration of interests.” Letter of the law, yes, but perhaps not its spirit, as the head of a leading watchdog organisation points out:

“He seems to have taken the most minimalist approach possible to this requirement. Perhaps Rishi Sunak should carefully read the ‘Seven principles of Public Life’ to make sure he is fulfilling the two principles of ‘Honesty and Leadership’.”

The great tax dodge

Of his wife’s UK investments, the trickiest is her 5% stake in a company called International Market Management (IMM)—which plans to build a chain of restaurants across India via franchise agreements with Jamie Oliver and the American fast food brand Wendy’s. 

The problem: The UK based company was founded by an investment banker David Stewart—and financed by “a group of wealthy friends and acquaintances”—including Akshata who picked up her 5% stake for £500,000. But IMM does not directly invest in India. Instead, it funnels money into a shell company in Mauritius called IMMASSOCIATES—which then invests the money in two Indian subsidiaries. 

Say what?

Like many other wealthy Indian and foreign investors, IMM is funnelling money via Mauritius to avoid taxes. Specifically, IMM’s investors can avoid paying a 20% capital gains tax imposed by the Indian government if and when the business is sold. And they only pay 5% in taxes on any income earned via dividend—as opposed to 10%. 

Is this illegal?

Again, no. It would be if Murty was ‘roundtripping’ her money—i.e. sending money from India to Mauritius and then channeling it back into India. There’s no evidence of that. 

Loss of revenue: But India’s tax treaty with Mauritius—which enables this kind of dodge—has resulted in a massive loss of tax revenue. As The Wire notes, more than 35% of the total Foreign Direct Investment ($125-plus billion) into India between 2000 and 2015 was funnelled through Mauritius—and for good reason:

“These are devices that foreign investors have used to divert as much profit earned in India as possible to Mauritius and show as much expenses as possible in India. Since Mauritius was not taxing these profits anyway (because it structured itself as a tax haven), the foreign investors would get away without paying any taxes (like capital gains tax) or very little tax (like corporate tax in India on profits earned in India but substantially eroded by inflating expenses like interest and royalty payments allowed under the treaty).”

Also this: The Mauritius dodge unfairly punishes domestic companies (who have to pay taxes) while favouring foreign investors.

A question of ethics: What may be a “standard approach” for many companies is not appropriate for Rishi Sunak who is the equivalent of his country’s finance minister. He should not be profiting from any wealth accrued from dodging another nation’s tax laws. As one social justice activist says:

“If the minimising of Indian tax revenues is ‘standard’ for British investors, that’s not a justification, it’s a condemnation… India needs its tax revenues for schools and hospitals.”

Point to note: The Modi government amended the tax treaty with Mauritius in 2017—but the stricter provisions don’t apply to IMM which was incorporated before that date.

The bottomline: Rishi Sunak is now presiding over an economy crippled by the pandemic. Handling his finances like the 0.1% in the midst of rising unemployment and bankruptcies is just plain unseemly—and it will not help his prime ministerial ambitions either.

Reading list

Guardian’s investigation into Akshata’s finances is here. The other piece on Mauritius is here. Also worth your time: The Wire’s deep dive into damaging effects of the Mauritius tax treaty. The Express has a book excerpt that profiles Sunak’s career. If you have a subscription, Business Standard has an excellent profile of Sunak—or check out Times of India’s piece on his prospects of becoming PM. NBC News charts Sunak’s rising popularity.